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by Eric Janszen
After Madonna's brother recently threw his obnoxious sister under the bus to sell a book, I'm encouraged to see that someone is sticking up in public for an obnoxious sibling for no apparent personal gain. But in the case of Lori Mozilo's defense of her brother, who is as much the embodiment as a symbol of a corrupt credit system, the sentiment is wasted.
Vilified: What You Don't Know About My Brother, Angelo Mozilo
July 17, 2008 (Huffington Post)
Let me start with a confession, well ... two confessions: First, I have always been a big fan of the sensational Congressional inquiry. Even as a child, during the Watergate hearings, I indulged in that secret smugness that comes from watching the rich and the powerful get theirs. Until recently, I have found few things as satisfying as the televised spectacle of some corrupt public figure, titan of industry, or scandalized bureaucrat withering under the relentless attack of my representatives on the Hill. Where the criminal justice system has been unable or unwilling to intervene, the Congress, at least, provided a public forum for getting to the truth and, by extension, stoking my sense of moral outrage. But that was before.
My second confession is that I am Lori Mozilo, youngest sister of Angelo Mozilo who, up until recently, was Chief Executive of Countrywide Mortgage.
I am writing because, although the Congressional hearings on the mortgage crisis did indeed stoke my sense of moral outrage, my anger, this time it has been reserved for Henry Waxman and the Democrats on his committee. As for the truth, it has been in very short supply. Like the reporters for a Beltway tabloid, Mr. Waxman and his partisans seemed to lose interest in the truth the moment it got in the way of the story they wanted to tell, a story characterized by handwringing, finger-pointing and shameless self-promotion.
No doubt Angelo makes a handy target for a Congress that desperately wants a good side show to take the public's attention away from the fact that for 18 years they failed to fund the SEC and other regulatory agencies to enable them to enforce existing securities and banking laws, contributing to the crisis we have today. Still, Lori's sisterly love is clouding her ability to understand why her bro is vilified. This letter from Countrywide to a prospective customer is a good example:July 17, 2008 (Huffington Post)
Let me start with a confession, well ... two confessions: First, I have always been a big fan of the sensational Congressional inquiry. Even as a child, during the Watergate hearings, I indulged in that secret smugness that comes from watching the rich and the powerful get theirs. Until recently, I have found few things as satisfying as the televised spectacle of some corrupt public figure, titan of industry, or scandalized bureaucrat withering under the relentless attack of my representatives on the Hill. Where the criminal justice system has been unable or unwilling to intervene, the Congress, at least, provided a public forum for getting to the truth and, by extension, stoking my sense of moral outrage. But that was before.
My second confession is that I am Lori Mozilo, youngest sister of Angelo Mozilo who, up until recently, was Chief Executive of Countrywide Mortgage.
I am writing because, although the Congressional hearings on the mortgage crisis did indeed stoke my sense of moral outrage, my anger, this time it has been reserved for Henry Waxman and the Democrats on his committee. As for the truth, it has been in very short supply. Like the reporters for a Beltway tabloid, Mr. Waxman and his partisans seemed to lose interest in the truth the moment it got in the way of the story they wanted to tell, a story characterized by handwringing, finger-pointing and shameless self-promotion.
"With a 40-year home loan, you could possibly have a lower, more affordable monthly mortgage payment than traditional 15 or 30-year loans, as well as the extra cash you need. Call Countrywide today and our Home Loan Consultants will help you apply for a refinance loan to consolidate your debt and get the extra cash you need to do the things you want - like make home improvements, pay for college tuition, or pay off high interest credit card debt!"
In the letter, Countrywide asks the prospect to violate at least three basic principles of sound household finance that were well understood by every person with a high school education in the US until the 1980s:- Never extract equity from your home except in dire emergencies, such as medical emergencies, and in some cases to pay for education. Home improvements at best return 80 cents on the dollar – for bathrooms and kitchens – so always finance them with cash, never with credit.
- Only ever refinance debt to reduce total interest expense, never monthly payments, except in dire emergencies.
- Never secure depreciating assets, like appliances purchased with credit cards, against your home: default on your credit cards, take a hit on your credit rating but default on your mortgage, bloated with debt initially on credit cards, and you lose your house.
If I were in charge of lending regulations, any communication from a lender to a prospect that recommended that consumers violate these common sense rules in consumers' interest would be cause the issuer to lose their license to operate. We can safely say that job is nowhere in my future.
Why are these household finance basics are known to the majority of Europeans and Asians but are voodoo to most Americans? It's something of a mystery. I'm looking into it for that book I'm writing. So far it looks like classes in household finance got thrown out with the Home Economics course bathwater in the 1970s. Now if Bernanke or anyone in a position of authority were to give few entertaining and informative 30 minute shows on household finance on prime-time TV – don't buy cars or TVs on credit, and so on – the US economy will come to a grinding halt soon thereafter. We are economically stuck in a cycle of financial ignorance and are dependent on ongoing and widespread misuses of credit to maintain it.
iTulip Select: The Investment Thesis for the Next Cycle™
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